Lifestyle Lending Woos New Members

Deciding whether to have a tummy tuck or not would most likely not be on the list of priorities for most consumers given the economic doldrums of the last few years.

The $3 billion Mountain America Credit Union may have proof that more consumers are gravitating to such procedures. While it experienced a slight dip in demand in 2011, the cooperative has seen a surprising upswing in requests since it launched its Lifestyle Lending program in November 2006.

Offered through Lifestyle Lending Solutions LLC, the program links credit unions with medical providers and local retail merchants to offer financing to cover the costs of cosmetic surgery, adoption, weight loss and funeral expenses among other services.

The way it works is that applicants receive information from a credit union offering the program. After the application is completed, the lender determines eligibility based on credit history and other factors. If approved, the applicant is notified and can proceed.

The Lifestyle Lending program is offered as part of the MeridianLink Inc. platform to automate loan processing and account opening. It can be set up to handle account opening or lending via any online, branch, call center, indirect or kiosk channels, according to the company. It can also be integrated with virtually any core system as well as other software programs. MeridianLink works with more than 20,000 financial service organizations.

Mountain America spent the first year building its program, said Pat Simmons, Lifestyle Lending manager at the credit union in West Jordan, Utah. Soon after, it financed $484,000 in loans. That amount has since grown to $13 million, its latest portfolio figure.

“We were trying to come up with ideas that would provide the opportunity to grow membership because it’s so competitive to get new members,” Simmons said. “It really blossomed from there.”

The Lifestyle loans have helped Mountain America create new connections. Simmons said 86% of the loans have been from new members, and the relationships have yielded strong cross-sell alliances with checking accounts, credit cards and savings products.

Since Lifestyle Lending was incorporated in 2007, more than 600 medical and retail providers have signed on, according to Kirk Harris, president/CEO of the company. There are about a dozen credit unions participating. More than 12,000 applications have been submitted with the average loan amount funded being $3,822. The average credit score for funded applicants is 718.

The program is currently offered in Arizona, California, Colorado, Idaho, Kansas, Nevada, New Mexico, South Dakota, Texas, Utah, Washington and Wyoming. Contracts are in negotiations in Florida, North Carolina and Pennsylvania.

“The goal is to create relationships that will help the credit union optimize profits, reduce costs, and increase business associations with medical and retail providers within the community–this is how to do it,” Harris said.

When Mountain America started offering the loans, medical services rolled out first, Simmons recalled. The credit union paired with a number of plastic surgeons, bariatric, Lasik and dental service providers. Members have since started requesting funding for hot tubs, heating and air, funeral and adoptions expenses. The average loan amount went from $3,100 in the first year to $5,700. Members’ average FICO score is around 728.

With all of its features to build a niche lending operation, Simmons acknowledged that the credit union has dealt with a small number of defaulted loans.

Consider the NumbersOver 12,000 - Applications Submitted

73% - Approval Rate for Water and HVAC providers

718 - Average Funded Credit Score

$3,822 - Average Amount Funded

663 - Average Credit Score Application Overall

Over $12 Million – Funded

13.27% - Average Funded Interest Rate

Over 600 - Medical & Retail Providers Signed

Less Than 1% - Delinquency (3.5 years reporting)

A Cosmetic Dentist Has 2,000 Active Patients On Their Books - Are Any Of Them Your Members? Could They Be?

Retail Is The Fastest Growing Group On Lifestyle Lending

“Everything we do is unsecured,” he said of the Lifestyle loans. “Our delinquency ratio is 1.4%, which is extremely low for unsecured credit.”

Each loan decision is assessed manually rather than through a computer system, Simmons pointed out. This arrangement has been the best way for Mountain America because he’s found that 20% to 25% of credit reports contain mistakes.

It’s no secret that over the past few years, the nation has been gripped by economic woes on a number of fronts. Simmons said in 2011 while there was a slight decrease in the number of loans funded, the dollar amount requested has significantly increased.

“We’re getting a lot more providers that want to get in on the program and we continue to see an uptick in interest,” Simmons noted.

From cross-selling to attracting new members, Harris notes the other outcomes of the loan program. Ninety-three percent of applicants are new to the participating credit unions. With a delinquency rate under 1%, there is a natural affinity to repay the loan, he added. The average amount of other loans generated because of the Lifestyle Lending loan is three.

For Simmons, the loan program continues to provide an alternative to the sluggish lending environment the credit union has gone through over the past few years.

“The reason that this system works is because it’s predicated on service. One of the things we tell any provider is we promise that we give good or better service to their clients or patients that they do. I think that’s part of the reason why it’s been so successful.”